Jakarta – The International Monetary Fund (IMF) said Wednesday the Indonesian economy was now on the right track, and that it would not lower its 2000 economic growth rate forecast of three to four percent, despite the weakening rupiah.

"We took the decision that we think the economy is on the right track," IMF senior deputy resident representative and chief economist Joshua Felman said.

Felman was speaking as the government signed a new letter of intent which is expected to free 400 million dollars in blocked IMF support funds by early June.

"I would say we reached this agreement because the Indonesian economy is getting better. We all know of course that in the past week the rupiah depreciated but we also know this economic team has accomplished very significant things during its time in office," he said. He said that in the first quarter all sectors of Indonesia's economy except agriculture posted growth.

When asked about the latest downgrade of 2000 gross domestic product projections to 1.5 percent by the Central Bureau of Statistics (BPS) in Jakarta, Felman said he preferred to see the figures as a part of a "range" rather than a revision.

"I don't think BPS changed the projection. They just gave a range of possibilities," he said. "From our side, of course we are not going to change our assumption based on what happened during one week. We all know sometimes the rupiah goes up and sometimes it goes down," he said.

Bank Indonesia governor Sjahril Sabirin meanwhile predicted the signing of the letter would boost the rupiah. "I think it [the signing] will have a positive impact on the rupiah," Sabirin said. "The market has been basically awaiting the direction of economic policies so now, with the signing of the LoI [letter of intent], I think it is a very significant step. The market will see this as positive."

The letter was signed by Sabirin and Finance Minister Bambang Sudibyo at the National Development Planning building, and was handed to Felman to present to the fund's executive board in Washington.

IMF officials have said the new letter of intent, outlining the revised agreement between Indonesia and the IMF, will be taken to Washington for approval by the fund's managing director and later by its executive board. The IMF executive board is expected to meet on May 31 to approve the changes to the economic program outlined in the new letter.